Conventional Mortgage
Definition of "Conventional mortgage"
A mortgage requiring a substantial down payment. It is usually only available to those having good credit, and has fixed monthly payments for the life of the loan. It usually has a 30 year period of fixed interest rates discharged on an amortized basis with equal monthly payments. The term conventional refers to a mortgage that is not FHA-insured or VA-guaranteed. Since there is no third person or entity to insure or guarantee the mortgage, the lender assumes full risk of default by the borrower. A lenders decision to make a conventional mortgage is usually dependent upon: (1) the value of the property being used to secure the debt and (2) the credit and income position of the borrower. As more and more conventional mortgages have been made, the loan to value ratio (relationship between the amount borrowed and the appraised value of the property) has continued to increase, even though most lenders still limit the amount they will lend to no more than 80% of value unless private mortgage insurance is carried. This down payment required is higher than with either VA or FHA loans. As the market price of residential real estate has continued to increase, a larger cash down payment has been required of the borrower, and thus many people have been eliminated from financing with a conventional mortgage. With both guaranteed and insured mortgages, people have been able to purchase real estate with a smaller cash down payment.
Popular Real Estate Terms
Also called an installment sales contract or contract foe feed. A type of creative financing in real estate allowing the seller to finance a buyer by allowing him or her to make a down ...
Government official who values real estate property for tax purposes and ascertains the annual property tax assessments that must be collected. ...
A lease granted for the right to explore for and recover oil and gas on a specific parcel of property. The terms of an oil and gas lease specify the length of time of the contract, the ...
Determines the ability of soil to absorb and draw down water. A percolation test is essential to determine the location of a drainage field for waste disposal. ...
The Grandfather Clause is an intriguing financial and real estate term. It defines a provision in a traditional policy that exempts an individual or business engaged in any activity under a ...
Legal proceeding whereby a person's property is attached and used to pay an obligation. The employer may withhold part of the employee's salary to the court until the debt has been paid. ...
Contiguous shore area bordering a river that is subject to periodic water level increases. In the flood stage, the flood plain can be under water. ...
(1) Bracket used to support an extended eave or cornice on the outside of a house. (2) Truss or beam projection beyond its base and supported by its strength and rigidity, such as a ...
The meaning of the term tort outlines a wrongful act resulting in injury or damages. For example, trespassing on someone’s private property can end up destroying a part of it. ...
Have a question or comment?
We're here to help.